Digital drags down profit for PMP

PMP’s pre-tax (EBIT) earnings were down by almost a third on last year’s figures, with the company claiming a 28.2 per cent dip from 2011’s half-year results as its struggling digital business impacts its bottom line.

Although sales were down by 7.1 per cent, to $577.5 million down from $621.9 for the first half last year, the print distribution and marketing company has made a net profit of $4.6 million after tax so far this year, which is in stark contrast to last year’s pre-tax loss of $14.8 million for the same period.

Perhaps one of the more troubling results for the company last half was the poor result in its digital business, with which it has been trying to expand its service offering, and transition into a multichannel marketing provider. PMP Digital’s pre-tax earnings only came to $0.1 million, which equates to a 76.8 per cent drop from last year’s results for the same period.

In light of this result, the company has pointed to lower activity in the retail market sector and a slower than expected take up of its workflow software system, DMarketer. The company says it has implemented a cost reduction program to combat the losses from its digital division.

In an effort to minimise losses in the long-term, the company says it expects around $8 million of restructuring costs in the second half of the year primarily relating to redundancies. This follows $2.8 million in significant items around redundancies for the financial year so far.

"At the back end of the first half we did some restructuring of the business, including redundancies and cost reduction initiatives...those benefits will flow into the second half," says PMP CEO, Richard Allely (pictured). "We're also looking at further restructuring, which should also deliver benefits probably by the second half."

PMP’s print revenue in Australia was down by 2.9 per cent, or $7.1 million, with the company citing lower volumes in its heatset printing operation, and its directory printing business, the latter of which was down in volume by a whopping 42.6 per cent.

However, in a turnaround that challenges the trend toward digital, the company’s Australian letterbox distribution first half sales was up by 1.3 per cent year on year following new contracts, and pre-tax (EBIT) earnings were $2.1 million, up 50 per cent on last year’s results.

The company says that, with its New Zealand transformation now nearing completion, it expects to make an annual saving of $18 million, with the full impact of the transformation set to flow through in the fourth quarter of this financial year, although revenue from its New Zealand operations fell by 7.1 per cent on the previous year for the same period, with weak trading conditions for its Gordon & Gotch magazine distribution service.

Allely says that, “given our expectation of tough market conditions in the second half of the year we expect full year EBIT – before significant items – to be in the range of $43 million to $47 million, and net debt of approximately $140 million as at June 2012.”